The most likely explanation for why the price index is rising is because   People are receiving greater income from helicopter checks and extended unemployment benefits so they can be more discriminating buyers to find the lowest prices. People are receiving greater income from helicopter checks and extended unemployment benefits and the money is beginning to enter the real economy. Firms are receiving more orders so productivity is

Q: As a result of the change in real GDP, will an increase in the interest rate on bank loans lead to…

A: The increase in the real GDP and the increase in the interest rate are two different factors. When…

Q: Why do consumers mostly gain little buying power during a deflation? Firms refuse to drop prices.…

A: A decrease in the average price level of all goods and services over time in a particular economy is…

Q: At the beginning of the fiscal year the labour union was able to negotiate a 1% increase in wages.…

A: At the end of the year, wages increases by 1% and inflation increases by 3%. Hence, the money wage…

Q: n the following statement: “Wage indexation can lead to an inflation spiral

A: It can be defined as the work of linking the rise in wages to changes in an index of a specific…

Q: The CPI in Mexico has been increasing consistently recently.  A change in expectations that reflects…

A: Consumer price index (CPI) refers to the measurement of weighted average price of the consumption of…

Q: In 2014, some European countries were dealing with a recession. Workers who were laid off in those…

A: In an economy, unemployment is classified in 4 ways such that Seasonal unemployment Cyclical…

Q: Assume that the economy is in a full employment equilibrium. There is an increase in consumer…

A: Meaning of Macroeconomics: The term macroeconomics refers to the situation of economic and…

Q: Which of the following events is likely to increase unemployment and drive the price level down?…

A: Unemployment refers to a situation in which the people of a nation who are ready and able to do a…

Q: The interest rate in the UK is 8%. The inflation rate in the US is 3% and in the UK 5%. Use the…

A: The Fisher Effect suggests that nominal interest rates factor in both real interest rates and…

Q: For each of the following events, choose whether the unemployment rate increases, decreases, stays…

A: (a). The correct option is the unemployment rate stays the same. This is because individuals that…

Q: Stagflation is a combination of: a) increasing unemployment and increasing inflation b) decreasing…

A: Stagflation is an economic condition with persistent high inflation combined with high levels of…

Q: Deflation refers to a situation where price level falls price level rises the rate of inflation…

A: Deflation is one of the components of the business cycle. The business cycle refers to those…

Q: The town of Marble Falls has 10 workers, of which 8 were employed and 2 were actively seeking work.…

A: Unemployment has the potential to stunt the development and expansion of the economy by lowering…

Q: In the short run, an increase in the unemployment rate is likely to be accompanied by

A: In the short run, an increase in unemployment is likely to be accompanied by decrease in the…

Q: During recessions, income a) falls and unemployment rises b) and unemployment both fall c) rises and…

A: Recession is a situation in which economic activities of a country falls.

Q: If, out of a population of 325 million, 140 million people are in the labor force and 133 million…

A: Total Population = 325 milion Labour force = 140 million Employed = 133 million

Q: However, the labor market is a derivative of the goods market in the Keynesian theory (“principle of…

A: According to the Keynesian School of Economics, the most important factor which impacts the real…

Q: When the economy is at potential GDP the unexpected inflation rate is blank and the unemployment…

A: When the economy is at potential GDP, the unexpected inflation rate is typically low, close to zero,…

Q: A rise in the price level means a: Group of answer choices lower value of goods lower value of money…

A: The economies tend to focus on their growth, and development, where various parties in the economy…

Q: Which statement is CORRECT? The Consumer Price Index is considered the best measure of long-run,…

A: )  Consumer price index (CPI) is defined as the average change in the prices of fixed baskets of…

Q: Assuming prices and output are somewhat flexible, an increase in worthless government spending will…

A: Government spending is a component of Aggregate Demand. With the increase in Government spending (…

Q: Jim holds $50,000 in money at the beginning of the year. The annual inflation rate is 2 percent, and…

A: Inflation tax signifies a fall in purchasing power of a given amount of money due to presence of…

Q: Your senators claim that lowering prices would be good for everyone—“Who doesn’t like lower prices,…

A: The phase of falling prices in the economy no pertaining to a particular industry but for a fall in…

Q: Which of the following statements is true? The consumer price index (CPI) measures changes in the…

A: Inflation is the general increase in prices(P) of services and items over time. The purchasing power…

Q: he graph shows an aggregate demand curve. raw a curve that shows the effect on aggregate demand fan…

A: Aggregate demand is the sum of consumption, investment, government spending and net export. AD = C +…

Q: Suppose the economy is experiencing an inflationary gap. In the long run, if there is no government…

A: An inflationary gap is said to exist in the economy when the actual gross domestic product (GDP)…

Q: During the Great Recession of 2008, many workers became discouraged and dropped out of the labor…

A: Labor force is a sum of people unemployed and people employed.

Q: Suppose that your economy is in long run equilibrium. The aggregate demand and aggregate supply in…

A: Aggregate demand (AD) and aggregate supply (AS) are concepts used in macroeconomics to describe the…

Q: Households tend to increase their spending during a recession because they realize that more…

A: Recession:- Recession can be defined as a period of economic contraction during which economic trade…

Q: f the current unemployment rate is 8% and the natural rate of unemployment is 6%, what do we know…

A: The natural rate of unemployment is the lowest level of unemployment that an economy can sustain…

Q: The percentage change in the overall level of prices in an economy is called a. contraction.

A: The overall price level refers to the average price level of goods and services in the economy. The…

Q: The aggregate demand curve shows  at each level of unemployment what is the total demand for goods…

A: The aggregate demand (AD) curve is a graphical representation of the relationship between the…